Scrip issue meaning

Reorganisation for tax purposes This Practice Note explains the meaning of a reorganisation for tax purposes, and outlines how shareholders are taxed when a company undertakes one. A reshaping of a company’s share capital ought to be tax neutral for its investors. For tax, it is treated as involving neither a disposal of existing shares nor an acquisition of replacement shares. A shareholder’s stake in the company before and after the reorganisation is regarded as the same asset for chargeable gains purposes. For tax purposes, a reorganisation is defined expressly by statute. A range of transactions (including bonus issues and rights issues) can fall within that statutory concept. By contrast, some other arrangements (for example, scrip dividends and vendor placings) do not satisfy the conditions to qualify as a tax-neutral reorganisation. Where such steps result in existing shareholders making, or being deemed to make, a disposal, the usual chargeable gains tax rules apply. The fundamental definition of a reorganisation of share capital concerns a single company...

What is a scrip dividend and why do companies make them? A scrip dividend—also known as a scrip or stock issue, a share dividend, or a scrip alternative—arises when a company gives its shareholders the choice to choose between receiving either: a cash dividend; or new shares (usually) of a value broadly equivalent to the cash dividend Such distributions are more prevalent in challenging economic conditions, when companies ordinarily seek to lessen the amount of any cash dividend they need to pay out. Shareholders may often favour the scrip option because it enables them to obtain new shares without having to pay: broker’s fees; or stamp taxes In addition, certain companies put forward ‘enhanced scrip dividends’ to encourage take-up by shareholders. Under an enhanced scrip dividend, the value of the shares issued exceeds the value of the corresponding cash dividend. There are particular tax rules that apply to scrip dividends, and these are described...

A company is generally understood to possess an implied authority to share its profits with its members, save where its articles of association state otherwise. A dividend constitutes one category of distribution that a company may make to its members; in practice, dividends are the distribution most frequently paid by companies. Any distribution must satisfy the requirements of Part 23 of the Companies Act 2006 (CA 2006), together with the applicable common law principles on distributions as adapted by that Part, if it is to be lawful. For an exploration of the legal framework and practical aspects of company distributions, see Practice Note: Distributions. For guidance on the ramifications of breaching the law on distributions, see Practice Note: Unlawful distributions. In ordinary usage, a ‘dividend’ means a portion of profits, whether at a fixed percentage or otherwise, apportioned to the holders of a company’s shares. The term is used for payments made to shareholders in their capacity as shareholders and not, for example, as remuneration for services...

Part 1, interpretation and limitation of liability This Part defines key expressions used throughout the articles and sets out how they are to be read. Terms such as articles, auditors, bankruptcy (including comparable overseas proceedings), board, CA 2006, certificated/uncertificated, chair, clear days, company’s lien, director, Disclosure Rules, FCA, FSMA, fully paid/paid, Official List, register of members, relevant officer, relevant system, UK Listing Rules, UKLA and writing are given specific meanings for consistent application. The model articles under section 20 of CA 2006 do not apply. Unless context dictates otherwise, words or expressions not defined here take the meaning given in CA 2006, or if absent there, in the Uncertificated Securities Regulations, as in force when these articles first bind the company. References to legislation include subordinate legislation and any amendment, extension, consolidation, re‑enactment or replacement then in force. Singular includes plural and vice versa; masculine includes feminine and neuter; references to persons include corporations. Liability of members: each member’s liability...